The 10 Most Brazen War Profiteers

By Charlie Cray, AlterNet

Posted on September 5, 2006, Printed on July 4, 2012
http://www.alternet.org/story/41083/the_10_most_brazen_war_profiteers

The history of American war profiteering is rife with egregious examples
of incompetence, fraud, tax evasion, embezzlement, bribery and
misconduct. As war historian Stuart Brandes has suggested, each new war
is infected with new forms of war profiteering. Iraq is no exception.
From criminal mismanagement of Iraq's oil revenues to armed private
security contractors operating with virtual impunity, this war has
created opportunities for an appalling amount of corruption. What
follows is a list of some of the worst Iraq war profiteers who have
bilked American taxpayers and undermined the military's mission.

No. 1 and No. 2: CACI and Titan

In early 2005 CIA officials told the Washington Post
that at least 50 percent of its estimated $40 billion budget for that
year would go to private contractors, an astonishing figure that
suggests that concerns raised about outsourcing intelligence have barely
registered at the policymaking levels.

In 2004 the Orlando Sentinel
reported on a case that illustrates what can go wrong: Titan employee
Ahmed Fathy Mehalba, an Egyptian translator, was arrested for possessing
classified information from the Guantanamo Bay prison camp.

Critics
say that the abuses at Abu Ghraib are another example of how the lines
can get blurred when contractors are involved in intelligence work. CACI
provided a total of 36 interrogators in Iraq, including up to 10 at Abu
Ghraib at any one time, according to the company. Although neither
CACI, Titan or their employees have yet been charged with a crime, a
leaked Army investigation implicated CACI employee Stephen Stefanowicz
in the abuse of prisoners.

CACI and Titan's role at Abu Ghraib
led the Center for Constitutional Rights to pursue companies and their
employees in U.S. courts.

"We believe that CACI and Titan engaged
in a conspiracy to torture and abuse detainees, and did so to make more
money," says Susan Burke, an attorney hired by the Center for
Constitutional Rights (CCR), whose lawsuit against the companies is
proceeding into discovery before the Federal Court for the District of
Columbia.

The private suits seem to have already had some effect:
In September 2005 CACI announced that it would no longer do
interrogation work in Iraq.

Titan, on the other hand, has so far
escaped any serious consequences for its problems (in early 2005, it
pleaded guilty to three felony international bribery charges and agreed
to pay a record $28.5 million Foreign Corrupt Practices Act penalty).
The company's contract with the Army has been extended numerous times
and is currently worth over $1 billion. Last year L-3 Communications
bought Titan as part of its emergence as the largest corporate
intelligence conglomerate in the world.

No. 3: Bechtel: precast profits

The
San Francisco-based construction and engineering giant received one of
the largest no-bid contracts -- worth $2.4 billion -- to help coordinate
and rebuild a large part of Iraq's infrastructure. But the company's
reconstruction failures range from shoddy school repairs to failing to
finish a large hospital in Basra on time and within budget.

Recall
that USAID chief Andrew Natsios originally touted the reconstruction as
a Middle Eastern "Marshall Plan." Natsios should have known that all
would not go smoothly with Bechtel in the lead: Prior to joining the
Bush administration, he was chief executive of the Massachusetts
Turnpike Authority, where he oversaw the Big Dig -- whose costs exploded
from $2.6 billion to $14.6 billion under Bechtel's lead.

In
July, the company's reputation for getting things done unexpectedly
plummeted like a 12-ton slab of concrete when Stuart Bowen, the special
inspector general for Iraq Reconstruction (SIGIR), released an audit of
the Basra Children's Hospital Project, which was $70 million to $90
million over budget, and a year and half behind schedule. Bechtel's
contract to coordinate the project was immediately cancelled.

Now
that the money is running out, American officials are beginning to
blame Iraqis for mismanaging their own infrastructure. But as Bowen
warns, contractors like Bechtel, the CPA and other contracting agencies
will only have themselves to blame for failing to train Iraqi engineers
to operate these facilities (esp. water, sewage and electricity) when
they leave.

No. 4: Aegis Defense Services

The
General Accounting Office (GAO) estimates 48,000 private security and
military contractors (PMCs) are stationed in Iraq. The Pentagon's
insistence on keeping a lid on military force requirements (thereby
avoiding the need for a draft) is one reason for that astronomical
growth, which has boosted the fortunes of the "corporate warriors" so
much that observers project the industry will be a $200 billion per year
business by 2010.

Yet the introduction of PMCs has put "both the
military and security providers at a greater risk for injury," the
General Accounting Office says, because PMCs fall outside the chain of
command and do not operate under the Code of Military Justice.

George
Washington University professor Deborah Avant, author of Market for
Force and an expert on the industry, says that while established PMCs
may act professionally, the government's willingness to contract with a
few cowboy companies like Aegis -- a U.K.-based firm whose infamous
founder and CEO Tim Spicer was implicated for breaking an arms embargo
in Sierra Leone -- only reinforces the fear that U.S. foreign policy is
being outsourced to corporate "mercenaries."

An industry insider
told Avant that the $293 million contract was given despite the fact
that American competitors had submitted lower bids, suggesting the
government wanted to hire the foreign company to shield both sides of
the transaction from accountability for any "dirty tricks."

Industry
critics, including Rep. Jan Schakowsky, D-Ill., say that, at a minimum,
Spicer's contract suggests that government agencies have failed to
conduct adequate background checks. While it's hard to say how often
PMCs have committed human rights violations in Iraq, the Charlotte News-Observer
reported in March that security contractors regularly shoot into
civilian cars. The problem was largely ignored until a "trophy video" of
security guards firing with automatic rifles at civilian cars was
posted on a web site traced back to Aegis.

Although the Army's
Criminal Investigation Division says no charges will be filed against
Aegis or its employees, critics say that only proves how unaccountable
contractors are under current laws. Since the war on terror began, just
one civilian, CIA contract interrogator David A. Passaro, has been
convicted for felony assault associated with interrogation tactics.

Even
The International Peace Operations Association, a fledgling industry
trade association that insists the industry abides by stringent codes of
conduct has rejected Aegis' bid to join its ranks.

No. 5: Custer Battles

In
March, Custer Battles became the first Iraq occupation contractor to be
found guilty of fraud. A jury ordered the company to pay more than $10
million in damages for 37 counts of fraud, including false billing. In
August, however, the judge in the case dismissed most of the charges on a
technicality, ruling that since the Coalition Provisional Authority was
not strictly part of the U.S. government, there is no basis for the
claim under U.S. law. Custer Battles' attorney Robert Rhoad says the
company's owners were "ecstatic" about the decision, adding that "there
simply was no evidence of fraud or an intent to defraud."

In fact
the judge's ruling stated that the company had submitted "false and
fraudulently inflated invoices." He also allowed the jury's verdict to
stand against the company for retaliating against the whistleblowers
that originally brought the case under the False Claims Act, the law
that allows citizens to initiate a private right of action to recover
money on taxpayers' behalf. During the trial, retired Brig. Gen. Hugh
Tant III testified that the fraud "was probably the worst I've ever seen
in my 30 years in the Army."

When Tant confronted Mike Battles,
one of the company's owners, with the fact that 34 of 36 trucks supplied
by the firm didn't work, he responded: "You asked for trucks and we
complied with our contract and it is immaterial whether the trucks were
operational."

The Custer Battles case is being watched closely by
the contracting community, since many other fraud cases could hinge on
the outcome. A backlog of 70 fraud cases is pending against various
contractors. Who they are is anyone's guess (one case was recently
settled against Halliburton subcontractor EGL for $4 million), since
cases filed under the False Claims Act are sealed and prevented from
moving forward until the government decides whether or not it will join
the case. The means some companies accused of fraud have yet to be
publicly identified, which makes it difficult for federal contracting
officers to suspend or debar them from any new contracts. The U.S. Air
Force moved to suspend Custer Battles from new contracts in September
2004, after the alleged fraud was revealed.

In May, however, the Wall Street Journal
reported that attempts were made to bypass the suspension order by two
former top Navy officials who had formed a company that purchased the
remnants of Custer Battles. Meanwhile, Alan Grayson, the attorney who
filed the Custer Battles case, says that because of orders passed by the
CPA, Iraqis have no chance of recovering any of the $20 billion in
Iraqi money used to pay U.S. contractors. The CPA effectively created a
"free fraud zone," Grayson says.

No. 6: General Dynamics

Most
of the big defense contractors have done well as a result of the war on
terror. The five-year chart for Lockheed Martin, for instance, reveals
that the company's stock has doubled in value since 2001.

Yet The Washington Post
reported in July that industry analysts agree that of the large defense
contractors, the one that has received the most direct benefit from the
war in Iraq is General Dynamics. Much of that has to do with the fact
that the company has focused its large combat systems business on
supplying the Army with everything from bullets to tank shells to
Stryker vehicles, which made their debut during the 2003 invasion.

In July, the Post
reported that the company's profits have tripled since 9/11. That
should make some people happy, including David K Heebner, a former top
aide to Army Chief of Staff Eric Shinseki, who was hired by General
Dynamics in 1999, a year before the Stryker contract was sealed.
According to Defense watchdogs at the Project on Government Oversight
(POGO), General Dynamics formally announced it was hiring Heebner on
November 20, 1999, just one month after Shinseki announced a new
"vision" to transform the Army by moving away from tracked armored
vehicles toward wheeled light-armored vehicles, and more than a month
prior to Heebner's official retirement date of Dec. 31, 1999.

Less
than a year and a half later, Heebner was present for the rollout of
the first Stryker in Alabama, where he was recognized by Shinseki for
his work in the Army on the Stryker project.

Although the
Pentagon's inspector general concluded from a preliminary investigation
that Heebner had properly recused himself from any involvement in
projects involving his prospective employer once he had been offered the
job, critics say the current ethics rules are too weak.

"It's
clear that the Army was leaning toward handing a multibillion-dollar
contract to General Dynamics at the very time Heebner may have been in
negotiations with the company for a high-paying executive position,"
says Jeffrey St. Clair, author of Grand Theft Pentagon, a sweeping review of war-profiteering during the "war on terror."

Heebner's
case is similar to Boeing's infamous courtship of Darlene Druyan, the
Air Force acquisition officer who was eventually sentenced to nine
months in prison and seven months in a halfway house for arranging a
$250,000 a year job for herself on the other side of the revolving door
while negotiating contracts for the Air Force that were favorable to
Boeing.

This March, Heebner reported owning 33,500 shares in the company, worth over $4 million, along with 21,050 options.

Not
everyone has been happy with the outcome of the Stryker contract. Tom
Christie, the Pentagon's director of operational testing and evaluation,
sent a classified letter to Donald Rumsfeld before it was deployed in
Iraq, warning that the $3 million vehicle was not ready for heavy fire.
Meanwhile, the GAO warned of serious deficiencies in vehicle training
provided, a concern that turned serious when soldiers accidentally drove
the Stryker into the Tigris rivers. Despite public praise from top Army
officials, an internal Army report leaked to the Post in March 2005
revealed that the vehicles deployed in Iraq have been plagued with
inoperable gear and maintenance problems that are "getting worse not
better."

Perhaps as insurance against any flap, General Dynamics
has added former Attorney General John Ashcroft to its stable of
high-powered lobbyists. Working the account are Juleanna Glover Weiss,
Vice President Dick Cheney's former press secretary, Lori Day Sharp,
Ashcroft's former assistant, and Willie Gaynor, a former Commerce
Department official who also worked for the 2004 Bush-Cheney reelection
campaign.

No. 7: Nour USA Ltd.

Incorporated shortly
after the war began, Nour has received $400 million in Iraq contracts,
including an $80 million contract to provide oil pipeline security that
critics say came through the assistance of Ahmed Chalabi, Iraq's No. 1
opportunist, who was influential in dragging the United States into the
current quagmire with misleading assertions about WMDs. Chalabi has
denied reports that he received a $2 million finder's fee, but other
bidders on the contract point out that Nour had no prior related
experience and that its bid on the oil security contract was too low to
be credible. Another company consultant who hasn't denied getting paid
to help out is William Cohen, the former defense secretary under
President Clinton. Many Iraqis now believe that Chalabi is America's
hand-picked choice to rule Iraq, despite being a wanted fugitive from
justice in Jordan and despite being accused of passing classified
information along to Iran. Iyad Allawi, a potential rival for power in
Iraq, has publicly criticized Chalabi for creating contracts for work
that he says should be the responsibility of the state.

Three
years into the occupation, after an evolving series of deft legal
maneuvers and manipulative political appointments, the oil giants'
takeover of Iraq's oil is nearly complete.

A key milestone in the
process occurred in September 2004, when U.S.-appointed Interim Prime
Minister Iyad Allawi preempted Iraq's January 2005 elections (and the
subsequent drafting of the Constitution) by writing guidelines intended
to form the basis of a new petroleum law. Allawi's policy would
effectively exclude the government from any future involvement in oil
production, while promising to privatize the Iraqi National Oil Co.
Although Allawi is no longer in power, his plans heavily influenced
future thinking on oil policy.

Helping the process move along are
the economic hit men at BearingPoint, the consultants whose latest
contract calls for "private-sector involvement in strategic sectors,
including privatization, asset sales, concessions, leases and management
contracts, especially those in the oil and supporting industries."

For
their part, the oil industry giants have kept a relatively low profile
throughout the process, lending just a few senior statesmen to the CPA,
including Philip Carroll (Shell U.S., Fluor), Rob McKee (ConocoPhillips
and Halliburton) and Norm Szydlowski (ChevronTexaco), the CPA's liaison
to the fledgling Iraqi Oil Ministry. Greg Muttitt of U.K. nonprofit
Platform says Chevron, Shell and ConocoPhillips are among the most
ambitious of all the major oil companies in Iraq. Shell and Chevron have
already signed agreements with the Iraqi government and begun to train
Iraqi staff and conduct studies -- arrangements that give the companies
vital access to Oil Ministry officials and geological data.

Although
Iraqi Oil Minister Hussain al-Shahristani said in August that the final
competition for developing Iraq's oil fields will be wide open, the
preliminary arrangements will give the oil giants a distinct advantage
when it comes time to bid. The relative level of interest by the big oil
companies depends on their appetite for risk, and their need for
reserves. Shell, for example, has performed worse than most of its peers
in finding new reserves in recent years -- a fact underscored by a 2004
scandal in which the company was caught lying to its investors. At this
point the key challenge to multinationals is whether they can convince
the Iraqi parliament to pass a new petroleum law by the end of this
year.

A key provision in the new law is a commitment to using
production sharing agreements (PSAs), which will lock the government
into a long-term commitment (up to 50 years) to sharing oil revenues,
and restrict its right to introduce any new laws that might affect the
companies' profitability. Greg Muttitt of Platform says the PSAs are
designed to favor private companies at the expense of exporting
governments, which is why none of the top oil producing countries in the
Middle East use them. Under the new petroleum law, all new fields and
some existing fields would be opened up to private companies through the
use of PSAs. Since less than 20 of Iraq's 80 known oil fields have
already been developed, if Iraq's government commits to signing the
PSAs, it could cost the country up to nearly $200 billion in lost
revenues according to Muttitt, lead researcher for "Crude Designs: the
Rip-Off of Iraq's Oil Wealth."

Meanwhile, in a kind of pincer
movement, the parliament has begun to feel pressured from the IMF to
adopt the new oil law by the end of the year as part of
"conditionalities" imposed under a new debt relief agreement. Of course
pressuring a country as volatile as Iraq to agree to any kind of
arrangement without first allowing for legitimate parliamentary debate
is fraught with peril. It is a risky way to nurture democracy in a
country that already appears to be entering into a civil war.

"If
misjudged -- either by denying a fair share to the regions in which oil
is located, or by giving regions too much autonomy at the expense of
national cohesion -- these oil decisions could fracture, and ultimately
break apart, the country," Muttitt suggests.